Art Diamond's web log

January 31, 2008

"Liberty and Life"

(p. 8) At the time of last month's referendum on Mr. Chávez's efforts to remake the Constitution to his liking, I got to know some of the "chamos," as the student activists are known. What struck me was not only how effective they were, but how different their movement was from almost all its many antecedents in the region.

Most important, the Venezuelans are not calling for socialist revolution, but for liberal democracy. Instead of vindicating the statist ideologies of the 20th century or the romantic passions of the 19th, they have embraced classic 18th-century humanism.

. . .

Will they make up a new political party? Can they remain united? Their enemy is formidable, and the chances of a violent or even tragic conclusion are very likely. But against the Chávez slogan, "Socialism or Death," they have their own: "Liberty and Life." In the battle of words they might have the upper hand. Perhaps they can take hope from a line by the Mexican poet-diplomat Octavio Paz: "We must give back transparency to words."

January 30, 2008

Information Technology Increases Choices on Where to Live

Stephanie and Bill Faunce moved their marketing company from Los Angeles to Steamboat Springs, Colorado. Source of photo: online version of the NYT article quoted and cited below.

Information technology is making life better by providing greater choice on where to live. There is still a lively debate about which regions and cities will prosper.

One popular take on this issue is Richard Florida's The Rise of the Creative Class.

(p. A1) As technology enables people to live and work wherever they want, increasingly they are clustering in resort playgrounds like Steamboat Springs (pop. 9,315) that have natural amenities, good weather — and, now, lots of people like themselves.

In places like Nantucket, the Upper Peninsula of Michigan and Teton County, Idaho, the migrants are creating hybrid communities, implanting urban incomes, tastes, careers, ambitions, restaurants, cultural activities and networking opportunities into small towns that un-(p. A15)til recently could support none of these, and for which there has been little planning and still no consensus.

“You are seeing a transformation of rural communities,” said Jonathan Schechter, executive director of the Charture Institute in Jackson, Wyo., a nonprofit organization that studies small recreational towns.

Into quiet resort spots the migrants have come, laptops on their knees: fund managers from New York, software developers from California, consultants, proofreaders, engineers, inventors. “The same processes that led to the suburbanization of the United States after World War II,” Mr. Schechter said, “are now producing a virtual suburbanization in places like Jackson or Steamboat Springs.”

From 2000 to 2006, population in the 297 counties rated highest in natural amenities by the United States Department of Agriculture grew by 7.1 percent, 10 times the rate for the 1,090 rural counties with below-average amenities, the department reported.

In towns that once emptied after the ski season or the beach season, these “location-neutral” migrants are complicating the traditional dynamic between tourists and locals. Here as elsewhere, average homes have become unaffordable for teachers, firefighters and others — the people who created the good schools and community closeness that newcomers said drew them. The rate of change “is causing a whiplash,” Mr. Schechter said, “because the towns don’t have the political and economic systems in place to deal with them.”

Routt County, which includes Steamboat Springs, is one of the first places to identify these new émigrés as a source of economic growth and, paradoxically, community stability. A 2005 survey found that as many as 1 in 10 year-round households was involved in a location-neutral business. Unlike retirees and second-home buyers, who are also roosting in vacation towns, they send children to the local schools. “Without kids, you don’t have a community,” said Scott Ford, a counselor at the Small Business Resource Center at Colorado Mountain College.

Cloistered in home offices, isolated from the local economy, location-neutrals are often invisible even to one another, except when they appear on local committees.

Many work as hard as their urban counterparts, often juggling commitments in several time zones, but can step from their offices to a hiking trail or mountain stream.

. . .

For Bill and Stephanie Faunce, who run a marketing company for cable operators, small-town life often means starting work at 7 a.m. and quitting at 11 p.m., but with breaks to hike, ski or be with their two young children. Their goal in coming here was not to slow down but to eliminate urban distractions and pressures.

“There are no stressors here,” said Mr. Faunce, 43. “In L.A., it took 90 minutes to get to the office, so we had a Mercedes and a Land Rover. Now we drive a Suburban. In three years we’ve put 15,000 miles on it.”

January 29, 2008

Marconi Matters

Larson's book plays off a murder mystery against Marconi as the innovator who brought us communication through the air.

I'm most enthused about hte Marconi part. It shows how he proceeded against the theorists of the day, whose theories told them that what he was trying to do was impossible. He was more entrepreneur, than scientist. And it turned out that it was a good thing that the theoretical scientists did not rule, as they might if all decisions about technology were made by the government.

What happened here is an example of what Taleb would call a Black Swan.

January 28, 2008

"City officials in New Orleans put this house, which flooded up to the floorboards when Hurricane Katrina hit and has undergone $90,000 in repairs, on a list of properties to be demolished because it supposedly was "in imminent danger of collapse."" Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A1) NEW ORLEANS -- IdaBelle Joshua worked hard to take care of her two-story house in the Lower Ninth Ward, even after Hurricane Katrina flooded it up to the roof and exiled her 150 miles away.

She spent $5,000 to have the brick house gutted, $275 to clean it and then went to City Hall on July 5 to make sure 2611 Forstall St. wasn't on a list of derelict properties here facing demolition because of storm damage. Two city employees assured her that the house was safe, she says.

Two days later, her nephew called. He had gone by to mow the lawn. But the house where Ms. Joshua and her late husband had raised three children was gone. It had been knocked down by the city. Since then, she has been trying to get an explanation, but with no luck.

"I'm a 79-year-old senior citizen, crippled and can't travel, and I can't pay anybody," she says. "I will be dead and gone by the time I get any recourse from the city. It's a travesty."

. . .

(p. A10) For many, though, getting off the demolition list is an exercise in futility. Owners are told to object in writing, but the city hasn't spelled out its rules for granting a reprieve -- or proof a house is safe from bulldozers. Ms. Breaux says the city is about to put more information on its Web site, including a search engine so owners can keep track of their property's status. Officials also plan to increase staffing in the City Hall department in charge of demolitions.

After $90,000 in post-Katrina repairs, the granite kitchen countertops at Chanel Debose's house at 3519 Washington Ave. are gleaming again. Workers just scraped the front porch for a new coat of paint. But her house also wound up on the demolition list.

When the storm hit, Ms. Debose and her husband rescued about 25 people in his fishing boat before giving it away and trudging out of the city on foot. She is angry that anyone trying to save New Orleans could have so much trouble fighting city hall.

"Mrs. Debose, a 36-year-old lawyer, used to dream about living here when she was growing up in a housing project nearby. "Ooh, when I get rich, I'm going to buy that house someday," she recalls thinking. She and her husband, Stanley, rescued about 25 people in his boat after Katrina inundated the neighborhood." Source of caption and photo: online version of the WSJ article quoted and cited above.

January 27, 2008

Raghuram Rajan on the Current Economic Downturn and the Subprime Mortgage Mess

"Traders in the oil futures pit of the New York Mercantile Exchange on Tuesday" (January 22. 2008). Source of caption and photo: online version of the NYT commentary quoted and cited below.

Raghuram Rajan is mentioned in the article quoted below. I first ran across him as the co-author of a book that was billed as applying Schumpeterian ideas of creative destruction to issues of economic growth and development.

Then, at the American Economic Association meetings in New Orleans in early January, I was on my way to a History of Economics Society reception, when I stumbled by chance into a modest reception in which Rajan was giving an informal speech on the subprime mortgage crisis.

It was such an interesting presentation, that I ended up totally missing the History of Economics Society reception. Rajan argued that the main problem was one of misguided incentives. Bonuses at top investment firms like Merrrill Lynch and JPMorgan Chase, are supposed to go to those whose investments produce high returns, with modest risks. The problem with the complicated securities based on the subprime mortgages was that they produced high returns, but the risks were actually also fairly high. The high-flying investors probably had some knowledge of this, but the public did not. In most years the investors could invest in the high return, but high risk, securities, and collect huge bonuses. But now the chickens have come home to roost.

Rajan suggested that the answer would be a change in the way in which the traders are given bonuses. Instead of handing them out annually, let them become vested only after observing the investment's track record for several years. If the investment goes south before the bonus is vested, the trader does not get the bonus. This would provide an incentive and reward for those who accurately accessed the risk of their investments.

(p. A1) . . . , Wall Street hasn't yet come clean. Even after last week, when JPMorgan Chase and Wells Fargo announced big losses in their consumer credit businesses, financial service firms have still probably gone public with less than half of their mortgage-related losses, according to Moody's Economy.com. They're not being dishonest; they just haven't untangled all of their complex investments.

"Part of the big uncertainty," Raghuram G. Rajan, former chief economist at the International Monetary Fund, said, "is where the bodies are buried."

As Mr. Rajan pointed out, this situation is more severe than the crisis involving Long Term Capital Management in the late 1990s. That was a case in which a limited set of bad investments, largely at one firm, had the potential to drive down the value of other firms' holdings in the short term. Those firms then might have stopped lending money because they no longer had the capital to do so. But their own balance sheets were largely healthy.

This time, the firms are facing real losses, which will almost certainly curtail lending, and economic growth, this year.

January 26, 2008

Free Market Can Provide Better, Cheaper Health Care

"Eve Linney, 5, who had an infected finger, went with her family last week to a walk-in clinic at a Duane Reade drugstore on Broadway in Manhattan. Her father, John, is at the counter." Source of caption and photo: online version of the NYT article quoted and cited below.

Clayton Christensen and co-authors in Seeing What's Next, make a plausible case for the improvement of health care through disruptive innovation. A key aspect of their vision is the increasing role of nurse-practitioners in taking on increasingly routinized tasks, a development they see as generally both effective, and cost-efficient.

The article excerpted below suggests that this trend is promising, if it does not get killed by the government, and by organized medical doctors protecting their turf from competition.

(p. A1) The concept has been called urgent care “lite”: Patients who are tired of waiting days to see a doctor for bronchitis, pinkeye or a sprained ankle can instead walk into a nearby drugstore and, at lower cost, with brief waits, see a doctor or a nurse and then fill a prescription on the spot.

With demand for primary care doctors surpassing the supply in many parts of the country, the number of these retail clinics in drugstores has exploded over the past two years, and several companies operating them are now aggressively seeking to open clinics in New York City.

. . .

More than 700 clinics are operating across the country at chain stores including Wal-Mart, CVS, Walgreens and Duane Reade.

New York State regulators are investigating the business relationships between drugstore companies and medical providers to determine whether the clinics are being used improperly to increase business or steer patients to the pharmacies in which the clinics are located.

And doctors’ groups, whose members stand to lose business from the clinics, are citing concerns about standards of care, safety and hygiene, and they have urged the federal and state governments to step in to more rigorously regulate the new businesses.

. . .

(p. A16) Patients, however, have flocked to the clinics, according to a new industry group, the Convenient Care Association.

“I think it’s great you don’t have to make an appointment. That could take weeks,” said Ezequiel Strachan, 33, who lives in Manhattan and walked into the clinic at the Duane Reade store at 50th Street and Broadway on a recent morning for treatment of a sore throat. “People here value their time a lot.”

The average waiting time for an exam at such clinics nationwide is 15 to 25 minutes, according to the Convenient Care Association.

The association estimated that 70 percent of clinic patients have health insurance and are using the clinics because of convenience. For them, costs may not be much different from those at doctors’ offices, because the same insurance co-payments apply. But uninsured patients could reap substantial savings.

In New York City, one in five residents lacks a regular doctor and one in six is uninsured, according to a recent survey by the city’s Department of Health and Mental Hygiene, and overcrowded emergency rooms are often their first resort for routine care.

. . .

MinuteClinic officials insisted that there was nothing improper in the relationships between providers and the drugstores and that medical care is not being compromised.

“We are transparent with regulators,” said Michael C. Howe, the chief executive of MinuteClinic, which is based in Minneapolis and operates more than 200 clinics nationwide. using the motto “You’re Sick, We’re Quick.”

Mr. Howe said the concerns of doctors’ groups and other critics “are being raised by voices of people who have not really studied the model.”

Preliminary data from a two-year study of claims from MinuteClinic by a Minnesota health maintenance organization, HealthPartners, which was released to The Minneapolis Star Tribune in July, showed that each visit to the retail clinic cost an average of $18 less than a visit to other primary-care clinics, but that pharmacy costs were $4 higher per patient.

Duane Reade, New York City’s largest drugstore chain, which opened four clinics in Manhattan in May, plans to open as many as 60 more across the city in the next 18 months. A key difference at the Duane Reade clinics is that they use doctors, while nurse practitioners and physician assistants typically provide the care at most retail clinics.

January 25, 2008

Global Warming May Give U.S. Access to Big Deposits of Oil, Gas and Minerals

The icebreaker Healy finished a new survey of the seafloor off the northern coast of Alaska. Source of photo: online version of the NYT article quoted and cited below.

(p. A16) A new survey by American oceanographers of the seafloor north of Alaska, completed last month aboard the Coast Guard icebreaker Healy, provides fresh evidence that the United States has much at stake in the region. The sonar studies found hints that thousands of square miles of additional seafloor could potentially be under American control. That floor might yield important deposits of oil, gas or minerals in coming decades, government studies have concluded.

So far did the sea ice pull back this summer that the expedition was able to scan the bottom several hundred miles farther north than in previous surveys, said the project’s director, Larry Mayer, an oceanographer at the University of New Hampshire. The team found long sloping extensions 200 miles beyond previous estimates.

Though more surveys will be needed to firm up any American claim, countries have a right to expand their control of seabed resources well beyond the continental shelves bordering their coasts if they can find such sloping extensions.

January 24, 2008

Perverse Incentives Undemine Air-Travel Efficiency

Source of graph: online version of the WSJ article quoted and cited below.

Why not solve the problem discussed below by privatizing airports, which would then have a profit-maximizing incentive to reduce congestion by charging more for landing rights? And if the prices were bid high enough, that, in turn would provide an incentive to build more airports.

(p. A1) The nation's air-travel system approached gridlock early this summer, with more than 30% of June flights late, by an average of 62 minutes. The mess revved up a perennial debate about whether billions of dollars should be spent to modernize the air-traffic control system. But one cause of airport crowding and flight delays is receiving scant attention. Airlines increasingly bring passengers into jammed airports on smaller airplanes. That means using more flights -- and increasing the congestion at airports and in the skies around them.

At La Guardia, half of all flights now involve smaller planes: regional jets and turboprops. It's the same at Chicago's O'Hare, which is spending billions to expand runways. At New Jersey's Newark Liberty and New York's John F. Kennedy, 40% of traffic involves smaller planes, according to Eclat Consulting in Reston, Va. Aircraft numbers tell the tale: U.S. airlines grounded a net 385 large planes from 2000 through 2006 -- but they added 1,029 regional jets -- says data firm Airline Monitor.

As air-travel woes have spread, some aviation officials and regulators, including the head of the Federal Aviation Administration, have begun saying delays could be eased if airlines would consolidate some of their numerous flights on larger planes.

Just two problems with that. One is that airlines like having more flights with smaller jets. The other is that passengers like it, too.

. . .

Former American Airlines boss Robert Crandall says Congress should let the FAA go back to controlling slots, matching scheduling to capacity. Airport overcrowding is "fixable, but it's not fixable without major policy change," the former AMR Corp. CEO said at a recent conference.

Another proposal: Change the structure of landing fees. Airports now set them by weight. A small jet pays a smaller landing fee than a large plane, even though its use of the runway is the same. Why not charge a flat fee per landing, suggest some economists -- or even charge the small jets more, to encourage airlines to shift to fewer flights on larger jets?

Yet another idea is to tie landing fees to the level of demand through the day, so they'd cost more at peak hours. This would encourage airlines to spread out flights and use bigger planes, says Dorothy Robyn, a consultant at Brattle Group and former aviation adviser in the Clinton administration. She says the current system "guarantees overuse of the air-traffic-control system because airlines aren't charged the true cost."

January 23, 2008

Subsidized Bread Leads to Long Lines, and Corruption

"A vendor sold bread on Wednesday in a poor section of Cairo, where lines are long and customers pushy." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A4) Much of what ails Egypt seems to converge in the story of subsidized bread. It speaks to a state that is in many ways stuck in the past, struggling to pull itself into the future, unable, or unwilling, to conquer corruption or even to persuade people to care about one another.

How do you take a broken system that somehow helps feed 80 million people and fix it without causing social disorder? That is a challenge for Egypt at large, and for this little bakery where Mr. Muhammad ekes out a living, with a cigarette hanging from his lips and an angry crowd demanding his bread.

. . .

“The most corrupt sector in the country is the provisions sector,” said a government inspector who asked not to be identified for fear of punishment. His job is to go to bakeries to ensure they are actually using the cheap government flour to produce cheap bread that is sold at the proper price.

The inspector explained why the system was so open to abuse. The government sells bakeries 25-pound bags of flour for 8 Egyptian pounds, the equivalent of about $1.50. The bakeries are then supposed to sell the flatbread at the subsidized rate, which gives them a profit of about $10 from each sack. Or the baker can simply sell the flour on the black market for $15 a bag.

If the inspector, who said he was paid $42 a month, certifies that after three months the baker has faithfully used the flour to bake bread, the baker gets a refund of about $1 a bag. A baker who goes through 40 sacks a day over the three-month period gets back 18,000 pounds (around $3,300) — a nice sum, this inspector said, which could easily be shared with an underpaid inspector.

. . .

Over the course of an hour one recent day, 14-year-old Mahmoud Ahmed managed four trips to the counter. His job, he said, was to ensure a steady stream of bread for a nearby food vendor, who then resold it in sandwiches. It appeared that the baker let him push his way to the front to get bread before others. Was there a deal going? Mahmoud would not say.

Down the road, five blocks away, a 12-year-old, Muhammad Abdul Nabi, was selling bread, the same kind of bread, from a makeshift table for more than double the price at the bakery. But there were no lines.

January 22, 2008

Alaska Air Used Skunk Works to Develop Check-In Innovation

Source of graphic: online version of the WSJ article cited below.

The innovation described in the article excerpted below is credited as arising from a 'skunk works' project. There's a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology. (Their plant was in a smelly part of town, so it was dubbed the 'Skunk Works.')

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure.

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.)

(p. B1) ANCHORAGE, Alaska -- When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don't want is a ticket counter," said Ed White, the airline's vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier's 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach -- which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport -- has doubled Alaska's capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4) Alaska's design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn't trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta's vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago -- and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn't aware of a visit to Anchorage but doesn't dispute it.

. . .

Alaska, the nation's ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline's ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

A series of secret rooms and a tunnel have been discovered under a building in Loughborough. The secret living quarters belonged to John Heathcote, a man who invited the fury of the Luddites after inventing a lace-making machine in the early 1800s.

. . .

Keeper of Charnwood Museum Susan Cooke added: "We don't know if (John Heathcote) did actually hide down there because he fled Loughborough and went to Devon."

January 20, 2008

Qaddafi's Nomadic Defense of Socialism

Inside a nomad tent near Kabul. Source: online version of the NYT article quoted and cited below.

(p. A4) In some instances, politicians seek to use nomadic traditions to justify their policies, just as American politicians try to exploit nostalgia for America’s rural past to justify farm subsidies, said Robert Rotberg, a professor at the John F. Kennedy School of Government at Harvard, who studies failed states in Africa and Asia. “Take Qaddafi in Libya,” he said, referring to Col. Muammar el-Qaddafi. “He would say, you Westerners don’t understand us because we have a nomadic ethos that is essentially socialist, and so we have to nationalize our country’s oil industry to be true to our tradition.”

January 19, 2008

"Freedom and Prosperity Are Highly Correlated"

(p. A13) . . . the evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs.

Empirical support for this view is presented again this year in The Heritage Foundation/The Wall Street Journal Index of Economic Freedom, released today. In its 14th edition, the annual survey grades countries on a combination of factors including property rights protection, tax rates, government intervention in the economy, monetary, fiscal and trade policy, and business freedom.

The nearby table shows the 2008 rankings but doesn't tell the whole story. The Index also reports that the freest 20% of the world's economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

January 18, 2008

"More Effective Economics Training Would Yield Enormous Dividends"

Source of the cartoon: online version of the NYT commentary cited below.

I agree with Franks, in the commentary excerpted below, that there is much room for improvement in the teaching of principles of economics. But I doubt that economics is alone in the dismal performance of students, six months after having completed the course.

My own views on improving the principles course, by including more content related to innovation and entrepreneurship, can be found in my article referenced at the end of this entry.

WHEN I began teaching economics in the 1970s, I noticed that people were generally disappointed when they learned what I did for a living. When I began asking why, many said something like this: “I took Econ 101 years ago, and there were all those horrible equations and graphs.”

Their unpleasant memories were apparently justified. Studies have shown that when students are tested about their knowledge of basic economic principles six months after completing an introductory economics course, they score no better, on average, than those who never took the course.

In other sectors of the economy, such dismal performance might provoke malpractice suits. But in the university system, students and their parents put up with this situation year after year.

. . .

Given the importance of the economic choices we confront, both as individuals and as a society, more effective economics training would yield enormous dividends. And in light of the low bar established by traditional courses, there seems little risk in trying something different.

Scientists at Private Firms Publish More Research Than Expected

Terence Kealey argues that science would be better done if it were all privately done, without government support. As you might expect, Kealey has not won any popularity contests among those receiving government support.

At the January American Economic Association (AEA) meetings in New Orleans, I heard a paper by Belenzon and Patacconi that presented evidence that scientists at private firms publish more research than Belenzon and Patacconi had expected to find.

January 16, 2008

Environmentalists Find Something Else for Us to Feel Guilty About

Source of the cartoon: online version of the NYT article cited below.

(p. 1) In the last few months, bottled water — generally considered a benign, even beneficial, product — has been increasingly por-(p. 10)trayed as an environmental villain by city leaders, activist groups and the media. The argument centers not on water, but oil. It takes 1.5 million barrels a year just to make the plastic water bottles Americans use, according to the Earth Policy Institute in Washington, plus countless barrels to transport it from as far as Fiji and refrigerate it.

. . .

But even the noblest of intentions can wilt in the heat.

Dave Byers, 65, from Silver Spring, Md., discussed the issue with his wife, Pat, on the steps of the Metropolitan Museum of Art on a 90-degree Saturday. “I think it should be banned, actually,” he said of bottled water.

As he spoke, he and his wife shared a bottle of Poland Spring. They said they felt bad about it, but it was hot.

January 15, 2008

More Choice Produces More Happiness

At the AEA meetings in New Orleans I heard an excellent luncheon address on entrepreneurship by R. Glenn Hubbard, the former chair of Bush's Council of Economic Advisers, and the current Dean of the Columbia Business School.

My ears especially perked up near the end, when he mentioned some survey research that showed that people have higher job satisfaction when they have more choice. He thought that this suggested that a society with more entrepreneurs would be one with higher job satisfaction, and suggested further, that this was a topic begging for further research.

The printed version of his talk, that he graciously sent me, does not have any full references to the survey research. But I've done some digging, and think that it's highly likely that he's referring to the extensive research of Ronald Inglehart and his colleagues.

I'm going to look into this more. In the meantime, an image of one of Inglehart's most recent books appears above, and a relevant quote from that book appears below.

(p. 288) As we demonstrated in Chapter 6, opportunities for making autonomous choices are closely linked with human happiness. This association holds true in a systematic way that operates across cultures: in all cultural zones, societies that offer their people more room for choice produce higher levels of overall life satisfaction and happiness. A society's level of subjective well-being is a strong indicator of the human condition, and it is systematically linked with freedom of choice.

Source:

Inglehart, Ronald, and Christian Welzel. Modernization, Cultural Change, and Democracy: The Human Development Sequence. New York: Cambridge University Press, 2005.

Reference to Hubbard luncheon address:

Hubbard, R. Glenn. "Nondestructive Creation: Entrepreneurship and Management Research in the Study of Growth." Paper presented at the Joint American Economic Association/American Finance Association Luncheon, New Orleans, Jan. 4, 2008.

January 14, 2008

Former French Socialist Lang: "Long Live Liberty! Long Live Life"

Lang on left; Sarkozy on right. Source of photo: online version of the NYT article quoted and cited below.

(p. A3) In the heat of the presidential campaign early this year, Jack Lang, a popular icon of the French left, accused Nicolas Sarkozy of ''trickery at the highest level,'' ''anti-republican behavior'' and -- perhaps most cutting of all -- being a ''Bush adapted for France.''

Now Mr. Lang, a former culture minister and education minister who served as campaign spokesman for the defeated Socialist candidate, Ségolène Royal, is the latest leading Socialist to defect to the Sarkozy camp.

. . .

''Human relations have deteriorated in the Socialist Party,'' Mr. Lang told the left-leaning daily Libération last week. ''Today I don't feel happy in this house.''

He accused the party of self-destruction, by casting out those who choose to work outside its structure. ''I am liberated,'' he said of his decision to leave the party leadership. ''They have helped me by allowing me to make a decision I should have made long ago. Long live liberty! Long live life.''

January 13, 2008

"The Tender Ship" is a Great, but Unknown, Book

Many years ago, I presented a paper on polywater at a conference at VPI (now called "Virginia Tech"). An old man in the audience came up to me afterwards, and told me about a book he had written called The Tender Ship. It sounded intriguing so eventually I bought a copy and read it.

It is well-written, creative, and rich with examples.

The central thesis is that the government usually is not very good at directing technology.

January 12, 2008

Newfoundland Benefits from Global Warming

"An iceberg as seen off the coast of Twillingate in Newfoundland." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) Up and down the rock-ribbed coast of Newfoundland in centuries-old fishing villages like this one, Americans and Europeans are taking advantage of a warming climate and a struggling regional economy to buy seaside summer homes for the price of a used SUV.

. . .

In Twillingate, at least 17 inns and bed-and-breakfasts regularly book Americans and Europeans, up from just two a decade ago. The tourists come to watch the shimmering procession of icebergs the size of city blocks that calve off the coast of Greenland and ride the Labrador Current past town between May and July. After the icebergs are gone, the waters fill with humpback, right and fin whales that spend summer feeding offshore.

. . .

Climate change is attracting some of the tourism. The average temperature during the summers in Newfoundland and Labrador has increased by nearly four degrees Fahrenheit over the past 20 years, says David Phillips, the Canadian government's senior climatologist. From 2001 through 2005, there were an average of 123 days when the weather was 77 degrees or warmer. In 1991-1995, it averaged just 63 days. Over the last 50 years the growing season -- the gap between winter's last frost and autumn's first -- has widened by three weeks.

. . .

Some Americans have begun to try to flip properties. New York artist Brian Byrne (sic) and his business partner bought a waterfront, six-bedroom home two years ago for $72,000. Now they're asking $170,000. "There's a lot of potential up there for tourism," Mr. Byrne (sic) says.

January 11, 2008

Feds Force Us to Fluoresce, Causing Migraines and Epileptic Seizures

Source: screen capture from the CNN report cited below.

The new energy bill signed into law on Weds., Dec. 19, 2007, included a provision to force us all to fluoresce starting in 2012. In the CNN report cited below, Dr. Sanjay Gupta summarizes recent research suggesting that fluorescent bulbs cause a significant increase in the number of migraine headaches and epileptic seizures.

January 10, 2008

Putin's Russia Portrays Stalin, Not as Monster, But as Strong Ruler

(p. 5) STALIN has undergone a number of transformations of his historical image in Russia, interpretations that say as much about the country’s current leaders as about the dictator himself.

In the West, Stalin is remembered for the numbers of his victims, about 20 million, largely his own citizens, executed or allowed to die in famines or the gulag. They included a generation of peasant farmers in Ukraine, former Bolsheviks and other political figures who were purged in the show trials of the 1930s, Polish officers executed at Katyn Forest, and Russians who died in the slave labor economy. Stalin’s crimes have been tied to his personality, cruelty and paranoia as well as to the circumstances of Russian and Soviet history.

While not denying that Stalin committed the crimes, a new study guide in Russia for high school teachers views his cruelty through a particular, if familiar, lens. It portrays Stalin not as an extraordinary monster who came to power because of the unique evil of Communism, but as a strong ruler in a long line of autocrats going back to the czars. Russian history, in this view, at times demands tyranny to build a great nation.

The text reinforces this idea by comparing Stalin to Bismarck, who united Germany, and comparing Russia in the 1930s under the threat of Nazism to the United States after 9/11 in attitudes toward liberties.

The history guide — titled “A Modern History of Russia: 1945-2006” — was presented at a conference for high school teachers where President Vladimir V. Putin spoke; the author, Aleksandr Filippov, is a deputy director of a Kremlin-connected think tank.

January 9, 2008

"At First, We Were Laughing at Him"

Source of the image: online version of the WSJ article quoted and cited below.

Below are some excerpts from one of the unique, sometimes funny, sometimes inspiring, front page stories that are a signature feature of the Wall Street Journal.

Rupert Murdoch, the new owner of the WSJ, is rumored in the press to dislike stories such as the one quoted below. I hope the rumors are wrong.

(p. A1) MASITALA, Malawi -- On a continent woefully short of electricity, 20-year-old William Kamkwamba has a dream: to power up his country one windmill at a time.

So far, he has built three windmills in his yard here, using blue-gum trees and bicycle parts. His tallest, at 39 feet, towers over this windswept village, clattering away as it powers his family's few electrical appliances: 10 six-watt light bulbs, a TV set and a radio. The machine draws in visitors from miles around.

. . .

(p. A13) The contraption causing all the fuss is a tower made from lashed-together blue-gum tree trunks. From a distance, it resembles an old oil derrick. For blades, Mr. Kamkwamba used flattened plastic pipes. He built a turbine from spare bicycle parts. When the wind kicks up, the blades spin so fast they rock the tower violently back and forth.

Mr. Kamkwamba's wind obsession started six years ago. He wasn't going to school anymore because his family couldn't afford the $80-a-year tuition.

When he wasn't helping his family farm groundnuts and soybeans, he was reading. He stumbled onto a photograph of a windmill in a text donated to the local library and started to build one himself. The project seemed a waste of time to his parents and the rest of Masitala.

"At first, we were laughing at him," says Agnes Kamkwamba, his mother. "We thought he was doing something useless."

The laughter ended when he hooked up his windmill to a thin copper wire, a car battery and a light bulb for each room of the family's main house.

The family soon started enjoying the trappings of modern life: a radio and, more recently, a TV. They no longer have to buy paraffin for lantern light. Two of Mr. Kamkwamba's six sisters stay up late studying for school.

"Our lives are much happier now," Mrs. Kamkwamba says.

The new power also attracted a swarm of admirers. Last November, Hartford Mchazime, a Malawian educator, heard about the windmill and drove out to the Kamkwamba house with some reporters. After the news hit the blogosphere, a group of entrepreneurs scouting for ideas in Africa located Mr. Kamkwamba. Called TED, the group, which invites the likes of Al Gore and Bono to share ideas at conferences, invited him to a brainstorming session earlier this year.

In June, Mr. Kamkwamba was onstage at a TED conference in Tanzania. (TED stands for Technology Entertainment Design). "I got information about a windmill, and I try and I made it," he said in halting English to a big ovation. After the conference, a group of entrepreneurs, African bloggers and venture capitalists -- some teary-eyed at the speech -- pledged to finance his education.

January 8, 2008

"Working Families in France Want to Be Richer"

(p. 1) In proposing a tax-cut law last week, Finance Minister Christine Lagarde bluntly advised the French people to abandon their “old national habit.”

“France is a country that thinks,” she told the National Assembly. “There is hardly an ideology that we haven’t turned into a theory. We have in our libraries enough to talk about for centuries to come. This is why I would like to tell you: Enough thinking, already. Roll up your sleeves.”

Citing Alexis de Tocqueville’s “Democracy in America,” she said the French should work harder, earn more and be rewarded with lower taxes if they get rich.

. . .

(p. 9) The government’s call to work is crucial to its ambitious campaign to revitalize the French economy by increasing both employment and consumer buying power. Somehow Mr. Sarkozy and his team hope to persuade the French that it is in their interest to abandon what some commentators call a nationwide “laziness” and to work longer and harder, and maybe even get rich.

France’s legally mandated 35-hour work week gives workers a lot of leisure time but not necessarily the means to enjoy it. Taxes on high-wage earners are so burdensome that hordes have fled abroad. (Mr. Sarkozy cites the case of one of his stepdaughters, who works in an investment-banking firm in London.)

In her National Assembly speech, Ms. Lagarde said that there should be no shame in personal wealth and that the country needed tax breaks to lure the rich back.

. . .

“We are seeing an important cultural change,” said Eric Chaney, chief economist for Europe for Morgan Stanley. “Working families in France want to be richer. Wealth is no longer a taboo. There’s a strong sentiment in France that people think prices are too high and need more money. It’s not a question of thinking or not thinking.”

January 7, 2008

Young Serial Entrepreneurs Seek New Challenges

(p. 1) SAN FRANCISCO — Max Levchin is not easily distracted from his work.

A few years ago, Mr. Levchin, one of the young princes of Silicon Valley, bought his first home, a 12-room Edwardian high atop a hill here, for $3.4 million. But Mr. Levchin, who made a fortune at age 27 selling PayPal, the online payment service he helped start in 1998, never moved in. He sold it two years later without having slept there for even one night.

. . .

Mr. Levchin, who is now 32, is typical of a new generation of junior titans in Silicon Valley who might be called the prematurely rich — techies worth tens of millions of dollars, sometimes more, at an age when many others are just starting to figure out what to do with their lives.

The Internet, a low-overhead medium with a global reach, has greatly accelerated the wealth creation phenomenon, producing a larger breed of multimillionaires even younger and richer than in the past.

They are happy to be wealthy, of course, but many of these baby-faced technology tycoons often seem indifferent to the buying power of their money, at least at this stage of their lives. Instead, nearly all of them have chosen to throw themselves back into a start-up, not so much because they want a spectacular new home or a personal jet — though many of them do — but be-(p. 16)cause they are in a competition with themselves and one another.

“For most of us, doing it again means surpassing what we’ve done previously,” said Peter A. Thiel, Mr. Levchin’s partner at PayPal, who also has started a new business, a hedge fund called Clarium Capital. “And that can be a really high bar.”

. . .

Maximillian Rafael Levchin was born and raised in Kiev, Ukraine, a Jew living under Soviet rule for 16 years. As the Soviet Union was crumbling, the family moved to the United States and settled in Chicago. But the worst year of his life, he said, was not when he was growing up but after eBay bought PayPal.

He thought he would spend the time after the sale “exploring my inner self.” Instead, he spent the better part of 12 months “feeling worthless and stupid” and baffled by what he might do with the remainder of his life. He felt too young to retire or downshift a gear or two — and too restless to become a philanthropist.

“I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that’s three hours a day,” Mr. Levchin said. “What about the remaining 18 hours I’m awake?”

. . .

In Silicon Valley, said Robert I. Sutton, a professor of management science and engineering at Stanford and co-founder of the Stanford Technology Ventures Program, remaining relevant, if not also admired and respected, requires that an entrepreneur continue to speed along in the fast lane.

“In other parts of the country, things like a great estate are the symbols people most respect,” Mr. Sutton said. “But here, the greatest status symbol is a person’s ability,” he added, to “still bring out hot new companies” and show that you are “working on the hot new technologies.”

"TAKING FIVE. Max Levchin spends a moment with his dog, Uma, but usually he works 15 to 18 hours a day at his start-up company, Slide.com." Source of caption and photo: online version of the NYT article quoted and cited above.

January 6, 2008

Without Subsidies, New Zealand Farming is More Efficient, and "More Enjoyable"

"Mr. Lumsden reviews maps of the paddocks on his family farm. The map is used to decide which paddocks the herds will graze and to help monitor the routes the cows will take to and from the milking shed." Source of photo: online version of the NYT article cited below.

(p. C1) OHINEWAI, New Zealand — Watching grass grow is supposed to be dull. But watching it grow with a dairy farmer like Malcolm Lumsden is anything but.

Cows turn grass into milk, and while dairy farmers in the United States and Europe rely much more on grain to feed cows, here in New Zealand grass is pretty much all they get. The richer and more abundant the grass, the richer and more abundant the milk.

So like mechanics tuning a race car engine, Mr. Lumsden and his fellow dairy farmers keep close track of the weight of the grass in their pastures, precisely measure its protein and sugar content, and produce computer charts tracking how much they have left to feed their cows through winter.

“It’s a science,” Mr. Lumsden mused as he watched a group of his black-and-white Friesians munching dark grass on a wet winter day. “It’s a real science.”

Dairy farming in New Zealand was not always this sophisticated. But ever since a liberal but free-market government swept to power in 1984 and essentially canceled handouts to farmers — something that just about every other government in an advanced industrial nation has considered both politically and economically impossible — agriculture here has never been the same.

The farming community was devastated — but not for long. Today, agriculture remains the lifeblood of New Zealand’s econ-(p. C5)omy. There are still more sheep and cows here than people, their meat, milk and wool providing the country with its biggest source of export earnings. Most farms are still owned by families, but their incomes have recovered and output has soared.

“Farming in New Zealand is now a cold, hard business,” said Mr. Lumsden, who at the time of the farming revolution was president of Federated Farmers in the Waikato region, the heart of New Zealand’s dairy country. “I think we have benefited hugely.”

New Zealand’s farmers are not the only ones convinced that eliminating subsidies, or at least sharply cutting them, is a good idea. As negotiators struggle to revive the failing global trade talks and Congress moves ahead on a new farm bill in the United States, New Zealand and Australia — which also cut subsidies but not as drastically — are being extolled by economists and advocates for poor countries as models for Americans and Europeans to follow.

“They went cold turkey and in the process it was very rough on their farming economy,” said Ray Goldberg, a retired professor of agriculture and business at Harvard Business School. “But they came out healthier and stronger. They proved it could be done.”

Traditional subsidies, economists contend, generally encourage inefficient farmers to grow unprofitable crops far beyond what consumers actually need, secure in the knowledge that the government will help protect them from loss. And they make it much harder for farmers in poor countries to compete on a level playing field against coddled farmers in the West. Removing subsidies, the argument goes, liberates the best farmers anywhere in the world to produce what people really want.

“When you’re not going to get paid for what the market doesn’t want, you have to get off your backside and find out what they want,” said Charlie Pedersen, who, when he is not raising sheep and beef cattle on his farm north of the capital, Wellington, is president of Federated Farmers of New Zealand.

. . .

“What’s happened since the reforms is that you have a new type of farm emerging — a business farm,” Mr. Lumsden said. Giving up subsidies made farming harder, he conceded, but introduced the pride that comes of entrepreneurship. “It made it more enjoyable,” he said.

January 5, 2008

How to Wrangle Tax Breaks from Rangel

"Charles B. Rangel, House Ways and Means chairman." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A23) The chairman of the House Ways and Means Committee has proposed legislation that would effectively halt some current tax audits of people who get a tax break for living and operating a business in the United States Virgin Islands.

Many beneficiaries of the tax break are campaign contributors to the lawmaker, Representative Charles B. Rangel, Democrat of New York, according to data collected by CQ MoneyLine, which tracks political contributions.

At least one of them, Richard G. Vento, is currently under audit, according to court filings. Mr. Vento gave $4,400 last year to the Baucus-Rangel Leadership Fund, which supports Mr. Rangel and Senator Max Baucus, the Montana Democrat who heads the Senate Finance Committee.

Beneficiaries of the tax break including Michael W. Masters and Richard H. Driehaus, money managers, accounted for more than half the $51,900 that individuals in the Virgin Islands gave last year to Rangel for Congress, the chairman’s campaign organization. Mr. Rangel raised almost three times as much from such donors last year as in any other year in the MoneyLine database.

January 4, 2008

"Not Even an Unchallenged Autocrat Can Repeal the Laws of Supply and Demand"

"Essentials like bread, sugar and cornmeal have all but vanished in Zimbabwe after the government commanded merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices in half and more. The shelves at this grocery store are mostly bare." Source of the caption and the photo: online version of the NYT article cited below.

(p. A1) BULAWAYO, Zimbabwe, July 28 — Robert G. Mugabe has ruled over this battered nation, his every wish endorsed by Parliament and enforced by the police and soldiers, for more than 27 years. It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.

One month after Mr. Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices in half and more, Zimbabwe’s economy is at a halt.

Bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs who denuded stores like locusts in wheat fields. Meat is virtually nonexistent, even for members of the middle class who have money to buy it on the black market. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.

The chaos, however, seems to have done little to undermine Mr. Mugabe’s authority. To the contrary, the government is moving steadily toward a takeover of major sectors of the economy that have not already been nationalized.

. . .

(p. A8) . . . Most of the goods on store shelves this week were those people did not need or could not afford — dog biscuits; ketchup; toilet paper, which has become a luxury here; gin; cookies.

At various locations of TM, a major supermarket chain, aisles of meat coolers were empty save a few plastic bags of scrap meat for dogs. Flour, sugar, cooking oil, cornmeal and other basics were not to be found. A long line hugged the rear of one store, waiting for a delivery of the few loaves of bread that a baker provided to stay in compliance with the price directive.

The government’s takeover of slaughterhouses seems ineffectual: this week, butchers killed and dressed 32 cows for the entire city. Farmers are unwilling to sell their cows at a loss.

The empty grocery shelves may be the starkest sign of penury, but there are others equally worrisome. Doctors say that at most, there is a six-week supply of insulin and blood-pressure medications. Less vital drugs like aspirin are rarities.

"Women in Esigodini, Zimbabwe, cook melons into mash. Meat has been so scrace that melons have been their main source of nutrition." Source of caption: print version of the NYT article cited above. Source of photo: online version of the NYT article cited above.

January 3, 2008

Huge Health Gains from Vaccines

Source of graphic: online version of the WSJ article quoted and cited below.

I hypothesize that most of the health gains from modern medicine come from a few advances, with vaccines being a very prominent example. (My hypothesis implies that many health care procedures do relatively little to increase health and longevity.)

(p. A18) Death rates for 13 diseases that can be prevented by childhood vaccinations are at all-time lows in the United States, according to a study released yesterday.

The study, by the Centers for Disease Control and Prevention in Atlanta, and published in The Journal of the American Medical Association, is the first time that the agency has searched historical records going back to 1900 to compile estimates of cases, hospitalizations and deaths for all the diseases children are routinely vaccinated against.

In nine of the diseases, rates of death or hospitalization declined more than 90 percent since vaccines against them were approved, and in the cases of smallpox, diphtheria and polio, by 100 percent.

In only four diseases — hepatitis A and B, invasive pneumococcal diseases and varicella (the cause of chickenpox and shingles) — did deaths and hospitalizations fall less than 90 percent. Those vaccines are all relatively new — the one for chickenpox, for example, was adopted nationally only in 1995. Also, some diseases like hepatitis typically strike adults, who are less likely to be immunized.

The results “are a testament to the fact that vaccines can drive diseases down to near nil,” said Dr. Gregory A. Poland, chief of the vaccine research group at the Mayo Clinic.

The story quoted below, reminds me of a story I told earlier about the famous democratic economist John Kenneth Galbraith ridiculing the wealth of Republicans.

Schumer's behavior exemplifies the "public choice" theory of economics that suggests that the motives of politicians will generally be similar to the motives of the rest of us. In other words, incentives often matter.

(p. A1) WASHINGTON, July 29 — June was a busy month for Senator Charles E. Schumer. On the phone, at large parties and small gatherings around the nation, he raised more than $1 million from the booming private equity and hedge fund industries for the Democratic Senatorial Campaign Committee, of which he is chairman.

But there is another way Mr. Schumer has been busy with hedge fund and private equity managers, an important part of his constituency in New York. He has been reassuring them that he will resist an effort led by members of his own party to single out the industry with a plan that would more than double the taxes on the enormous profits reaped by its executives.

Mr. Schumer has considerable say on the issue. In addition to being the third-ranking Democrat in the Senate leadership, he is the only Democrat serving on both of the major committees, Banking and Finance, that have jurisdiction in the matter.

He has long been a pro-business Democrat and a fund-raising machine for the party, as well as a vociferous supporter of Wall Street issues in Washington, much the way Michigan lawmakers defend the auto industry and Iowa politicians work on behalf of corn farmers.

But in the case of the tax proposals, the strategy behind Mr. Schumer’s efforts is putting to the test another set of principles he is known for. He has regularly portrayed himself as a progressive politician who identifies with the struggles of the middle class and is sharply critical of the selfish “plutocrats” who he says control the Republican Party.

January 1, 2008

Prominent Transplant Surgeon Endorses Market for Kidneys

Source of graphic: online version of the WSJ article quoted and cited below.

(p. A1) Amid a severe kidney-donor shortage, an idea long considered anathema in the medical community is gaining new currency: payments for people willing to give up a kidney.

One of the most outspoken voices on the topic isn't a free-market libertarian, but a prominent transplant surgeon named Arthur Matas.

Dr. Matas, 59 years old, is a Canadian-born physician best known for his research at the University of Minnesota. Lately, he's been traveling the country trying to make the case that barring kidney sales is tantamount to sentencing some patients to death.

"There's one clear argument for sales," Dr. Matas told a gathering of surgeons earlier this year. The practice, currently illegal in the U.S., "would increase the supply of kidneys, save lives and improve the quality of life for those with end-stage renal disease."

The doctor supports a regulated market only for kidneys, since live donors can give one up and survive without excessive health risks. (Transplants of other organs, such as livers and lungs, pose greater complications to a living donor.) And Dr. Matas doesn't rule out financial incentives for the families of deceased donors.